Something is changing inside Xactimate, and it may already be affecting the bottom line of restoration companies across the country before many owners have even heard about it.
Verisk, the parent company of Xactimate, has introduced updated labor efficiency settings — including a new designation called large loss efficiency — that alter how labor time is calculated and, by extension, what an estimate pays out. According to industry consultants Ben Justesen and Nate Cisney of Restoration Made Simple, the average restoration contractor is not yet aware that this is happening.
“It’s going to get even hotter because many people don’t even know about it yet,” Justesen said.
To understand the impact, it helps to know what Xactimate’s labor efficiency settings actually do beneath the surface. Each line item in Xactimate is supported by a set of time assumptions Verisk calls supporting events — built-in allowances for things like drive time, breaks, setup, cleanup, and overall loss of productivity from working in a restoration environment.
Those time allowances get factored into labor pricing. The new large-loss efficiency setting reduces several of those allowances significantly. According to Justesen, the setting removes the 60-minute daily drive time assumption entirely, trims the setup and cleanup allowance from roughly 42 minutes to 35 minutes, and eliminates the 37.5-minute restoration-environment productivity loss factor altogether.
Justesen said each trade is reduced differently, but the larger point is that the setting cuts what he described as waste time on labor. Contractors, he said, are no longer being compensated for drive time or for the overall loss of productivity that comes with working in a restoration environment.
Based on calculations from Justesen and Cisney, the net result is an average reduction of 4% to 5% off the total estimate compared with standard restoration pricing. That may not sound dramatic in isolation, but when applied across every job where a carrier or adjuster chooses to use the large-loss setting, the cumulative effect is significant.
“Most of us as contractors don’t realize when something maybe happens that hurts us adversely because we’re just running businesses,” Cisney said.
At the core of the concern is a question nobody seems to have a clear answer to: What, exactly, is a large loss? Justesen said Verisk’s definition, as communicated so far, is vague, and that vagueness creates opportunity for misapplication. He compared it to long-running disputes over overhead and profit, where ambiguous definitions often worked against contractors.
Cisney said he does not think a single definition cleanly captures what constitutes a large loss, noting that some of the most labor-intensive jobs he handled involved small-dollar losses complicated by difficult property owners. Justesen added that if insurers know applying the setting saves 5% on an estimate, the incentive to push the threshold lower is obvious.
Justesen also objected to the architecture of the setting itself because it applies globally across an entire estimate, adjusting labor pricing on every trade and line item at once. On a large church restoration project, for example, he said some trades might legitimately benefit from efficiency gains, while specialty work with minimum mobilization charges can already be badly underpriced even before any additional reduction is applied.
The inverse problem appears on small jobs as well. A minor drywall patch still requires multiple coats, precise humidity and temperature thresholds, and curing time between coats. Carpet-cleaning setups also require fixed preparation time regardless of whether the job covers 50 square feet or 500. In those cases, the labor inefficiency on a small job may actually be higher, not lower.
Justesen recommended that restoration professionals visit Verisk’s website and make sure they are signed up to receive notifications about product and pricing updates. He said the large-loss setting was released or is being released now, and many estimators and business owners have not seen the notice.
Both Justesen and Cisney said staying passive is not a viable response. Justesen pointed to Restoration Industry Association efforts to hold meetings, prepare position statements, and develop educational materials in response to the change, while also pressing Verisk to make labor-efficiency adjustments trade-specific rather than global.
“I think they see the concern,” Justesen said. “And Verisk isn’t the only one — we have to look at all the estimating software programs and what they’re doing in their pricing and what they’re doing in their labor efficiencies.”
Cisney’s closing message was direct: contractors need to get educated, get involved, and get organized to push for what they believe are fair standards.
This article is sourced from Cleanfax. Read the original report.